This Communication proposes a series of specific measures aimed at strengthening the economic competitiveness of European Union (EU) regions bordering the acceding countries.

ACT

Communication of 25 July 2001 from the Commission on the impact of enlargement on regions bordering candidate countries - Community action for border regions [COM(2001) 437 final - Not published in the Official Journal].

Updated by:

Progress Report of 29 November 2002 on the Communication from the Commission on the impact of enlargement on regions bordering candidate countries - Community action for border regions [COM(2002)660 final].

SUMMARY

The challenge of the enlargement of the EU, foreseen for 1 May 2004, with eight central and eastern European countries (Estonia, Hungary, Latvia, Lithuania, Poland, Czech Republic, Slovakia and Slovenia) and two Mediterranean countries (Cyprus and Malta) is unprecedented in the history of the EU. Over and above the purely economic considerations, the success of enlargement depends to a large extent on the support of present and future European citizens.

Within the framework of the accession partnership and the adoption of the Community acquis, the EU is providing important financial and technical assistance, helping the future Member States in implementing deep structural reforms. The agreement on agricultural and regional policy reached in December 2002 at the Copenhagen European Council allowed to provisionally close the accession negotiations and lay down financial assistance for these countries until the end of 2006.

The economic gap between the existing and the future Member States is considerable. This is especially visible along large parts of the EU's border with candidate countries. Particular attention needs to be paid to these areas in order to turn the challenge of enlargement into a real opportunity of socio-economic development. Reinforcing information and communication measures is a good means of attaining such an objective.

THE ECONOMIC SITUATION OF BORDER REGIONS

The border regions concerned are defined as regions at NUTS II level, bordering the acceding countries by land or sea and situated around NUTS III regions involved in cross-border programmes under the INTERREG III A Community Initiative in the period 2000-2006. The EU counts 23 such border regions:

There are important disparities between these regions, mainly regarding the economic development, the employment rate, the infrastructure, the level of education, or the share of the gross domestic product (GDP) devoted to research. While the per capita income is relatively high in Italy, Finland, most Austrian regions and Bavaria, it is lower than 75% of the EU average in the new German Länder, Greece and Austria's Burgenland. Compared to the whole EU, the group of these 23 border regions nevertheless attains the present EU's average development level and employment rate. Per capita income and productivity are also higher in these regions than in the neighbouring regions of the acceding countries, except for Bratislava. The Second Progress Report on economic and social cohesion provides an important insight into the particular socio-economic situation of border regions.

Existing Community policies

For the 2000-06 period, the border regions of acceding countries will benefit from several forms of Community financial assistance through:

the Cohesion and Structural Funds;The new German Länder, all the Greek regions and Burgenland are eligible for Objective 1 (assistance to regions whose economic development is lagging behind). Several areas adjacent to candidate countries in Germany, Austria, Italy and Finland receive assistance under Objective 2 and partially under Objective 3. The INTERREG III Community initiative grants European assistance for cross-border, transnational and interregional cooperation. Additionally, the three other Community Initiatives (LEADER+ for rural development, EQUAL for equality in the labour market and URBAN II for urban areas) are important sources of support.

pre-accession assistance for candidate countries;Similar to the Structural Funds, the pre-accession assistance includes the financial instruments ISPA and Sapard and the Phare programme. Phare also provides specific support to cross-border cooperation (Phare-CBC) between geographical areas at NUTS III level situated on both sides of the border.

State aid for regional purposes The majority of the NUTS III regions bordering accession countries qualify for state aid for regional purposes, except for four: Wiener Umland Nord and Süd in Austria and Neustadt a/d Waldnaab and Schwandorf in Germany. This state aid helps businesses in the border regions to cope with the special problems of the enlargement process. Furthermore, under the present state aid rules, a substantial complementary assistance is offered to Member States.

Trans-European networks in transport, energy and telecommunication;

the loans of the European Investment Bank (EIB);These loans are meant to support environmental and transport infrastructure projects.

other Community programmes in the area of education, training, youth and environment.

Effects of enlargement in border regions

Since the transition process started in 1990, the border regions have already benefited from their geographical proximity to the EU. The relatively well-developed infrastructure and low labour costs have contributed to stimulating markets, investments and tourism in these areas.

The income gap between the EU and the accession countries has led to fears of large migration flows into the EU. In the light of the studies carried out and the experience of the accession of Spain and Portugal in 1986, the migration from the future Member States towards the EU should not exceed 1% of the present European population and the negative impact on wage levels is rather modest. Furthermore, the accession negotiations have established a series of measures (including a transition period, a review mechanism, safeguards and declarations of the Member States), which progressively introduce free movement of workers over 5-7 years. Immigration may even help to limit the adverse effects of ageing populations and to overcome labour shortages in some sectors.

The daily cross-border migrations vary considerably from one border region to the other, ranging from 1 to 8% of labour in different regions. Cross-border commuting affects mainly Germany and Austria. In the first case, it is mainly focused along the border of Bavaria with the Czech Republic. As for the second, Austria shares borders with four candidate countries (Hungary, Czech Republic, Slovakia and Slovenia) and its main economic centres (Vienna, Graz and Linz) are located close to these borders.

With regard to economic integration, the competitive pressure generally associated with enlargement is already noticeable since the EU has lifted most customs duties and quantitative restrictions in trade in agricultural and industrial products from candidate countries. In general, capital-intensive and technologically advanced sectors in the border regions are likely to benefit from enlargement, while labour-intensive sectors (agriculture, heavy industry) are likely to face competition from cheaper labour coming from acceding countries.

COMMUNITY ACTION FOR BORDER REGIONS

The Commission estimates that the measures taken for all the EU regions need to be complemented by other action to contribute to better economic integration. Instead of creating a new specific instrument, a combination of new and improved existing measures will be most effective in addressing the specific needs of border regions. Moreover, the focus should be placed on providing better information on the objectives and benefits of enlargement.

The new measures aim to provide specific additional funding to border regions, worth a total of EUR 305 million. These measures are the following:

EUR 150 million to support the trans-European transport network (TEN-T);The relevant Financial Regulation regarding TEN projects currently limits Community contributions to a maximum of 10% of the total project cost, causing a problem for acceding countries with limited resources. For the cross-border projects aimed at eliminating mainly rail bottlenecks, the Commission proposes raising the existing 10% threshold to 20%. In order to complement the ISPA assistance for acceding countries, the Commission decided to allocate additional assistance of EUR 100 million to the Member States for the 2003-06 period, and EUR 50 million from existing funds not already committed.

Developing a municipal infrastructure facility in co-operation with the EIB to support small-scale municipal infrastructure projects in the social and economic sectors.First focused on Poland, this assistance will ultimately cover all the acceding countries. EUR 35 million for 2002 and EUR 15 million for 2003 is allocated under the Phare programme.

Additional assistance of EUR 50 million under INTERREG III;A special support of EUR 30 million to border regions derives from the flexibility instrument and addresses 13 INTERREG III programmes covering regions bordering on the future Member States, and the Strand B INTERREG III programme for the Baltic Sea Region. Furthermore, the creation of networks (e.g. INTERACT), information activities and the technical assistance to project development benefit from additional assistance of EUR 20 million.

An additional amount of EUR 45 million for the competitivity of the regions and small and medium-sized enterprises (SMEs);Initiated by the European Parliament, the budget line (Pilot project on the impact of enlargement for the regions bordering the candidate countries) granted support of EUR 30 million to the ARGE project, which is a network of 28 chambers of commerce located in the EU regions bordering the acceding countries. The aim of this project is to strengthen the competitiveness of labour-intensive enterprises in three areas: information, implementing a development strategy and cross-border cooperation.In addition, the Commission has published three calls for proposals, for a total amount of EUR 15 million. These aim to encourage cross-border cooperation and are meant to support the Euro-Info Centres, trade unions, regional and local authorities.

Additional measures in favour of young people;EUR 10 million has been additionally allocated to the YOUTH programme for the 2003-2006 period. The national agencies which manage the programme in a decentralised manner are invited to present cross-border cooperation plans with a view to encourage mobility, initiative, intercultural learning and solidarity among young people from the present and future Member States.

In addition to these measures providing additional funding, the action plan of the Commission proposes a better co-ordination of existing policies. The aim of this action plan is to strengthen the coherence and efficiency of Community policies with an important impact on border regions:

To improve the co-ordination between Phare-CBC and INTERREG;On 6 September 2002, the Commission amended the Phare-CBC Regulation to make it more consistent with INTERREG III, namely regarding the eligibility of actions. This amendment is applicable for Phare 2003 programming. On the same date, the Commission adapted the Phare Guidelines 2003-06 in order to enable acceding countries to use their Phare funds for participating in the INTERREG programmes.Under the territorial principle, the Commission has drawn the conclusion that the current legislative framework clearly rules out the use of Structural Funds resources - and namely those available for INTERREG - for investment projects, e.g. sewage plants, bridges, technology centres, outside the territory of the European Union. A less rigid interpretation of the territorial principle is however feasible in the following cases: to finance expenses for participants from non-Community countries at meetings of the monitoring committees and subcommittees from the technical assistance budget according to Regulation No 1685/2000 on eligible costs; to reimburse the same expenses (travel and subsistence expenses, seminars, work placements, language courses) for the strand A projects of INTERREG III, except for the investment projects; to purchase services or equipment from partner countries, in accordance with EC public procurement law.In view of its geographical position in close proximity to four acceding countries, Vienna is now eligible for INTERREG III A programmes with Hungary and the Czech Republic [Official Journal C 239 of 25.9.2001].

Policy initiatives in the agricultural sector;To improve the competitiveness and diversification of economic activities, the border regions can re-orient their rural development programmes in the light of the mid-term evaluations foreseen for the end of 2003.The implementation of the "trans-national co-operation" strand of the LEADER + Community Initiative regarding rural development is effective and includes the participation of acceding countries.

The floods of summer 2002 in Eastern Europe caused serious human and material damage in certain border regions in Germany, Austria and the Czech Republic. To be able to respond immediately to the needs of those suffering a disaster, the European Union has established the European Union Solidarity Fund, for which the annual allocation amounts to EUR 1 billion. In 2003, it will support the above regions. It is not limited geographically, but by the nature and size of the disaster.

RELATED ACTS

Commission Regulation (EC) No 2760/98 of 18 December 1998 concerning the implementation of a programme for cross-border cooperation in the framework of the PHARE programme [Official Journal L 345 of 19.12.1998]

Council Regulation (EC) No 2236/95 of 18 September 1995 laying down general rules for the granting of Community financial aid in the field of trans-European networks [Official Journal L 228 of 23.09.1995]

This Regulation establishes the conditions and procedures for granting Community aid to projects of common interest in the field of trans-European networks for transport, energy and telecommunications.